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No-fault insurance blamed for massive fraud

By Insure.com - Last updated: February 17, 2003

Allstate Insurance Company and Encompass Insurance Group have filed a civil lawsuit in the Supreme Court of New York against several magnetic resonance imaging (MRI) facilities, management companies, two individuals and a physician.

Allstate and Encompass accuse them of conspiring in a fraudulent medical billing scheme.

The insurance companies claim the scheme involved kickbacks to encourage unnecessary patient referrals to MRI facilities. Allstate claims in some cases, a doctor allowed laypeople to use his name, so they could refer patients to MRI facilities without a valid medical opinion.Allstate says the scheme led to 12-thousand bogus insurance claims, resulting in $25 million dollars in payments.

“A wave of fraud has been unleashed upon the state, insurers, consumers of medical services and the premium-paying public,” says Steve Englert, special investigations manager for Allstate. “Most dangerous, is the likely negative impact on the quality of care provided to patients, where medical testing facilities are controlled by laypersons, and referrals are bought. Until we tighten the no-fault laws in New York State, including stiffer criminal penalties, drivers in New York will continue to face threats to their health care and pay a premium to insurance cheats. “

“The no-fault system needs stronger safeguards against fraud perpetrators, “ said Englert. The type of fraudulent activity alleged in the complaint is driving up the cost of insurance for all consumers, and is a threat to the health and safety of New York’s drivers.”

"Encompass Insurance is committed to eliminating fraud from our business”, said Leo Fansler, assistant vice president for claims. “Our customers need to know that we will work to help control insurance costs by aggressively combating this serious problem."

New York cracks down on insurance fraud

New York’s insurance commissioner says the state is working hard to stop the kind of fraud, Allstate and Emcompass are alleging. "The Department’s hard-hitting approach to eliminating insurance fraud is clearly evident with the record breaking statistics for 2002. The Department’s efforts to prompt changes to laws regulating insurance fraud, promote increased law enforcement collaborations resulting in more expansive sweeps, increase consumer education programs and utilize forfeiture laws have resulted in our best, most aggressive year fighting fraud," says New York Insurance Commissioner Gregory Serio.

“We introduced sweeping legislative changes that create new felony penalties and new crimes including the crime of no-fault insurance fraud,” Serio adds. “Although we have seen no action [from lawmakers], we remain optimistic that this will be the year that the legislature institutes real meaningful reform for New York State’s drivers."

Serio says regardless of the system of auto insurance a state has, there will always be fraud.Serio says his office is addressing auto insurance fraud, and claims the results speak for themselves.